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AGENCY

Introduction:

The law is governed by Part X of the Contract Act1950.

An agenta person employed to do any act foranother or to represent another in dealings withthird persons: s.135

The principalthe person for whom such act isdone, or who is so represented.

Agencyis the relationship which subsistsbetween theprincipal & the agent, who has beenauthorized to act for him / represent him in

dealings with others.

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2 contracts are in effect in

agency:-

1. Contract made between principal &

agentwhich the agent derives his

authority to act & on behalf of theprincipal

2. Contract made between the principal &

the third party through the work of anagent

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cont

Any person who is 18 years old/ above &

who is of sound mindmay be a principal. :

s.136

Any person may become an agentBUT

persons of unsound mind & who are below

18 years of age are not liable towards theirprincipals for acts done by them as agents :

s.137

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CREATION OF AGENCY

A contract of agency can be expressed /

impliedfrom the circumstances & the

conduct of the parties:

KGN Jaya Sdn Bhd v. Reliance Sdn Bhd

Court of Appeal held : the law does not

require that an agency /sub-agencyagreement must be in writting

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Cont

An agency may arise in the following ways:

By express appointment by the principal

By implied appointment by the principal

By ratification by the principal

By necessity; i.e by operation of law

By the doctrine of estoppel / holding out.

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By express appointment : s.139

Express appointment by the principal

Authorization may be given by words

spoken / written : s.140

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By implied appointment: s.139

(i) Implied appointment when a person, by

his words / conduct, holds out another

person as having authority to act for him:i.e. it can be inferred from the

circumstances of the case : s. 140

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Case: Chan Yin Tee v William Jacks @ Co.

(Malaya) Ltd

Facts: AppChan, Yonga minor, wereregistered as partners in business.

At the meeting with resp co, Chan held himselfout to be Yongs partner.

Then supplied goods to Yong but the price wasnot paid.

Resp co obtained judgement against Chan &Yong.

Chan appealed.

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cont

Held: Irrespective of whether Chan was a

partner or not, Chan had the authority to do

things on his behalf & and as such, liablefor Yongs act.

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(ii) Relationship between husband & wife

Presumptionhusbandprincipal & wifeagent, wife has an authority to pledge herhusbands credit for necessaries suited to their styleof living.

Can be rebutted:

(a) he has expressly forbade his wife to pledge his

credit (b) he expressly warned the tradesman not to

supply his wife with goods or credit; or

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cont

(c) his wife was sufficiently provided forwith goods of the kind in questions; or

(d) his wife was given a sufficientallowance for buying the goods withouthaving to pledge her husbands credit; or

(e) the order, though for necessaries, wasunreasonable, taking into consideration herhusbands income at that time.

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cont

(iii) By the Partnership Act 1961S 7:

partners are each others agent when

contracting in the course of the partnershipbusiness.

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By ratification: s.149

Can be created by either an agent,

who duly appointed & has exceeded his authority,

or a person, who has no authority to act for theprincipal & has acted as if he had the authority.

When either one of the above happens, the

principal can either:-

- reject or,

- accept the contract so made

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cont

The effect of ratification is to render the

contract binding on the principal as if the

agent had been properly authorizedbeforehand: s.149

Ratification is retrospective: i.e. it dates

back to the time when the original contractwas made by the agent & NOT at the time

of ratification.

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cont

Ratification can only be done:

(I) The act or contract must be unauthorized

(2) The unauthorized act must be one which

is recognized by law.

(3) the agent must, at the time of the

contract, expressly act as agent for the

principalS 149.

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cont

Must not allow 3rd party to believe he is theprincipal.

CASE: KEIGHLEY MAXTED & CO V.DURANT [1901]

Facts: Roberts, was authorized by the Keighley tobuy wheat at a certain price.

Robert exceeded his authority & bought at higherprice from Durant & used his own name butintending it for Keighley.

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cont

Keighley agreed o take the wheat at that

price but failed to take delivery.

Held: Keighley was not liable to Durant, ashe could not ratified Roberts contract, since

Robert did not profess to act as agent.

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cont

(4) contract entered into by a company or its

agent prior to its formation may be ratified

by the co after its formationS35 Co Act1965.

CASE: COSMIC INSURANCE V

KHOO CHIANG POH

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cont

(5)The principal must have contractual capacity at

the time when the contract is made & at time of

ratification (6) The principal must have full knowledge of the

material factsat the time of ratification

(7) The principal must ratify the whole act or

contractcannot accept only part which

advantageous to him & reject the rest

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cont

(8) the ratification must be made within a

reasonable time.

(9) the ratification must not injure a thirdparty.

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By necessity (in an emergency) :

s.142

It is created when a person is entrusted with

anothers property & it becomes necessary to

do something to preserve that propertyalthough he has no express authority to do so.

There must be already some existing

contractual relationship between the principal

& the person who acts on his behalf; e.g.between the owner & the master of a ship @ an

owner & a carrier of goods.

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cont

May be created if the following

conditions are satisfied:-

i)it must be impossible for the agent to get theprincipals instruction

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CASE: SPRINGER V GEATWESTERNRAILWAY COMPANY [1921]

Def agreed to carry ptfs tomatoes from Jersey toCovent Garden market.

Owing to bad weather, the ship arrived late atWeymouth.

Defs employees were on strike, tomatoes wereunloaded by casual labourers some of tomatoes

were found to be bad. Def decided to sell tomatoes as they felt that

tomatoes could not arrive in Covent Gardenmarket in a saleable condition.

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cont

Ptf claimed damages.

Held: ptf was entitled to damages because

defs were not agent s of necessity becausethey have failed to communicate with the

ptf when they could have done so.

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(ii) The agents action is necessary

I.e to prevent loss to the principal withrespect to the goods

Eg: perishable goods If no urgency existsgoods are merely sold

because of inconvenience agency ofnecessity does not arise.

(iii) agent of necessity has acted in goodfaith

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By estoppel

Generally, a person CANNOT be bound by

a contract made on his behalf without his

authority. BUT, if he, by his words & conduct, allows

a third party to believe that X is his agent,

when X is not, and the third party relies onit, he will be estopped / precluded from

denying the existence of Xs authority.

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Types of Agency

Agents may be classified according to:-

1. the extent of their authority

2. their functions

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Classification according to the

extent of authority:-

A universal agent

A general agent

A special agent

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Classification according to

functions:-

Del credere agents

Factors

Brokers

Auctioneers

Bankers

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Duties of principal and agent:

s.164178 C A 1950

Agents Duties:

To obey theprincipals instructions : s.164

Failure - will result in breach of contract & agentwill be liable for any loss suffered by theprincipal.

Refer to illustrations in C A 1950.

Case: Turpin v Bilton [1843] 5 Man. & G. 455,held: the agent was liable when he failed toinsure a ship when instructed to do so & the shipwas lost.

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cont

However, an agent is under NO duty to

obey instructions of his principal if the

instructions are unlawful. Case: Cohen v Kittel[1889] 22 Q.B.D 680;

Held: the agent was not liable for failing to

place bets.

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cont

2. In the absence of instructions from the

principal, to act according to the customs

which prevail, in doing business of the samekind, at the place where he carries on his

work.

Otherwise, he has to make good any losssustained by the principalS 164.

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Skill & diligence required from

agent : s.1653. An agent is bound to conduct the business ..with

asmuchskillas is generally possessed by

persons engaged in similar business, unless the

principal has notice of his want of skill. The agent is bound

to act withreasonable diligence,

to use such skill as he possesses; &

to make compensation to his principal in respect

of the direct consequences of his own neglect,

want of skill, or misconduct

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CASE: KEPPEL V WHEELER

Facts: def - agent instructed by ptf -, principal, tosell his house.

An offer was received & accepted by ptf subjectto contract.

A few days later, a higher offer was made by X,but agent didnt communicate this new offer toptf.

A written contract of sale between ptf & 1st ofereewere duly signed.

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cont

Held: def was liable to ptf for the difference

between two offers, coz agent must disclose

everything that coming to his knowledgewhich is likely to influence the principal in

making the contract.

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To render proper accounts when

required : s.166

4. An agent is under a duty to account for all

the monies & property handled by him as

agent for the principal & to produce suchaccounts when demanded by the principal.

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To pay his principal all sums

received on his behalfS 171

5. However, an agent may retain / deduct from such

sums received, advances made / expenses incurred

by him in carrying out his duty, his commission &other remuneration payable to him for acting as

agentS 170

s.174gives the agent the right to retain his

principals property in his possession until hisremuneration is paid, unless his contract provides

the contrary.

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To communicate with the

principal

6. In cases of difficulty, an agent must use all

reasonable diligence in communicating

with & in seeking to obtain instructionsfrom the principalS167.

However, in emergencies, the agent may

use his own discretion in adopting a courseof action to safeguard the interest of the

principal - 142.

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Not to let his interest conflict

with his duty

7. The duty of an agent is to act solely for the

benefit of the principal & he cannot allow

his own personal interest to conflict withthis duty : s.169

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Not to make any secret profit out of

the performance of his duty (e.g. a

bribe, secret commission / financial

advantage): s.168

8. But if the principal knows about the secret profit& consents to it, the agent is entitled to keep theprofit.

If however, the profits are secret, then the

principal may:-a) Repudiate the contract if it is disadvantageous to

him

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contb) Recover the amount of secret profit from the agent

: s.169

c) Refuse to pay the agent his commission / otherremuneration

d) Dismiss the agent for breach of duty

e) Sue the agent & the third party giving the bribe,for damages for any loss he may have sustainedthrough entering into the contract

Case:Mahesan v Malaysian Govt. Officers Co-operative Housing Society Ltd

Held: resp. could recover either the bribe / theamount of the actual loss suffered by it as a result

of entering into the contract.

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cont

9. Not todisclose confidential information /

documents entrusted to him by his principal

10. Not todelegate his authority

Maxim: delegatus non potest delegatea

delegate cannot delegate.

There are exceptions to this general rule

(please, refer on your own )

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Duties of a principal to his agent:

s175178 C A 1950

1. Agent to be indemnified against consequencesof lawful acts : s.175

- to pay the agent the commission / otherremuneration agreed, unless the agencyrelationship is gratuitous.

2. Agent to be indemnified against consequencesof acts done in good faith. : s.176

- not to willfully prevent / hinder the agent fromearning his commission.

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cont

3.Non-liability of employer of agent to do acriminal act : s.177

- to indemnify the agent for acts done in theexercise of his authority.

4. Compensation to agent for injury caused byprincipals neglect: s.178

- the right to be indemnified entitles the agent torecover not only his commission / remuneration

but also money which he paid on the principalsbehalf & all losses suffered by him in carryingout the directions of his principal.

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cont

However, the agent loses his right to

indemnified if he acts beyond his duty or if

he has performed his duty negligently.

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The Authority Of The Agent

General rule:

An agents acts are binding on the principal

if they are done within the agentsauthority.

BUT if an agent does an act which exceedsthat authority so given, the principal isnotboundUNLESS he adopts & ratifies theauthorized act.

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An agents authority may be :-

Actual; or

Apparent (ostensible)

Actual authorityis authority expresslygiven by the principal (orally / in writing);

orimpliedfrom the express authority given,from the circumstances of the case, custom /usage of trade, & the conduct of parties.

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cont

Apparent / ostensible authorityis that which isnot expressly given by the principal but which thelaw regards the agent as possessing although the

principal has not consented to his exercising suchauthority.

Case:The Firm of T.AR. CT v The Firm of SV.K.R.

Held: that an agent who had authority to part withthe firms money had, in the circumstances of thecase, a necessary implied authority to receiverepayment for the firm.

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cont

Note:-

Secret / private restrictions on the authority

of the agent DO NOT affect a third partywhodoes not know of such restrictions &

who has acted ingood faith in relying on

the agents apparent authority.

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Termination Of Agency

Agency may be terminated by:

1. The act of the parties, or

2. By operation of law

T i ti b th t f th

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Termination by the act of the

parties

It means by theact of the principal / agentExample:-

by mutual consent, by revocation by the principal, or

by renunciation of the agency by the agent

Note:Revocation / renunciation of the agencymay be expressed / implied by the conductof the principal / agent.

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..cont

The principal may revoke the authority at

any time before it has been exercised to

bind the principal. Where the agency is for an indefinite

duration, the agent can terminate the

agency by givingreasonable notice oftermination to the principal : s.159

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cont

Where the agency is for a definite / fixed

period of time, the agent CANNOT

terminate the agency before the expiry ofthat period without just cause.

Otherwise, hell be liable to the principal

for damages for any loss caused by thepremature termination of the agency : s.158

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Termination by operation of law When the contract of agency has been

performed: s.154

Upon the expiry of the period fixed in the

contract of agency

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cont

Upon the death of the principal or the agent:s.161, Illustration C

An exception to this general rulewhere theagent has an interest in the property which forms

thesubject-matter of the agency. In such case,when the principal dies, the agent may continue toexercise authority; & if the agent dies, theauthority passes to the agents personal

representatives.: s.155, Illustration A When principal dies, the agent must take all

reasonable steps to protect & preserve the interestsentrusted to him. : s.162

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cont

When the principal or agent becomes insane

When the principal or agent becomes insolvent /

is made bankrupt or by frustration when anevent happens which renders the agency

unlawful.

Note:Upon insolvency, a persons rights &

liabilities are vested in the Official Assignee &,the agency relationship ceases.